David Drumm authorised deals leading to falsification of bank's balance sheet, court hears

Drumm has pleaded not guilty to conspiring to defraud depositors and investors by “dishonestly” inflating Anglo’s deposits figure by €7.2 billion.

Friday 9 February 2018 12:27

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Updated at 8pm

DAVID DRUMM, THE former chief executive of Anglo Irish Bank, authorised deals which lead to the falsification of the bank’s balance sheet, a jury has been told at the opening of his conspiracy to defraud trial.

Drumm’s defence counsel has told his trial that there were facts he wished to admit to which would reduce both the length of the trial and the complexity of the evidence.

A jury at Dublin Circuit Criminal Court heard today that Drumm, the former chief executive of Anglo Irish Bank, allegedly authorised deals which led to the falsification of the bank’s balance sheet.

Drumm (51), with an address in Skerries, Co Dublin, has pleaded not guilty to conspiring with former bank officials Denis Casey, William McAteer, John Bowe and others to defraud depositors and investors at Anglo by “dishonestly” creating the impression that deposits in 2008 were €7.2 billion larger than they were.

He has also pleaded not guilty to false accounting on 3 December 2008, by furnishing information to the market that Anglo’s 2008 deposits were €7.2 billion larger than they were.

Tessa White BL, defending, told Judge Karen O’Conor that r Drumm accepted all factual matters as set out by the prosecution, relating to the transactions that took place in September 2008.

However, she said, Drumm disputes whether they were fraudulent or dishonest, or that there was any dishonesty in their reporting.

White provided the jury with a detailed typed handout, setting out the parameters of a series of transactions, which will be discussed in evidence over the course of the trial.

She said Drumm admits that on 16 March 2008, he disclosed to others in Anglo that the Governor of the Central Bank raised an issue described as “how the Irish banks could help each other”.

This initiative, White told the jury, essentially encouraged Irish banks to provide mutual support to each other in response to the global financial and liquidity crisis.

“David Drumm directed that Anglo give consideration to this initiative,” she said.

The first series of transactions outlined to the court in the course of Drumm’s admissions were referred to as the “March Transactions”.

Monthly transactions

White said that on or about March 31, 2008, the date of Anglo’s half-year end, Anglo placed €1 billion with Irish Life & Permanent.

Irish Life Assurance plc then deposited €750 million with Anglo.

Shortly after 31 March, Irish Life & Permanent repaid the €1 billion and Anglo repaid the €750 million to Irish Life Assurance. The court heard that the purpose was to increase Anglo’s non-bank deposits by €750 million over its half-year end reporting period.

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The court was then told of the “June Transactions” which took place on or about 30 June, 2008, which was Irish Life & Permanent’s half-year end.

At this time Irish Life & Permanent transferred bonds in excess of €3 billion to Anglo, White told the jury.

Anglo then placed €3 billion with Irish Life & Permanent. Shortly after 30 June, Irish Life & Permanent repaid the €3 billion to Anglo, which then returned the bonds to them.

White said the purpose of these transactions was to reduce Irish Life & Permanent’s reliance on ECB funding over its half-year end reporting period.

The court then heard of the set of transactions which form the subject matter of this trial, known as the “September Transactions”.

In the period coming up to 20 September 2008, White said, Anglo placed approximately €7.2 billion with Irish Life & Permanent via a series of short term transactions.

In return, Irish Life & Permanent, on behalf of Irish Life Assurance, deposited approximately €7.2 billion in a similar manner with Anglo.

“The purpose of these transactions was to increase Anglo’s non-bank deposits by €7.2 billion over its year end reporting date of 20 September 2008,” White said.

Prosecution counsel had told the jury earlier that there was nothing illegal in itself about moving money around between banks.

The final transactions referenced by White are known as the “December Transactions”.

Between 30 September 2008 and 19 December 2008, Irish Life & Permanent and Anglo agreed to enter into a transaction similar to the June Transactions.

The intention, White said, was that this transaction would be reversed shortly after 31 December 2008.

“While the process had commenced, the transactions were never completed, and the parts which were completed were reversed prior to 31 December 2008,” she said.

White concluded her submission by saying that Drumm, as CEO of Anglo, authorised the March, June, September and December transactions, and assumes responsibility for their execution by Anglo.

This morning, at the opening of the trial, prosecutors described Drumm (51) as “the man who called the shots” at Anglo Irish Bank.

They said the deals he authorised also made it appear deposits from customers were €7.2bn greater than they were in reality.

The court heard that Drumm was involved in a conspiracy with others to dress up and falsify the bank’s balance sheet during “very rocky” times for the banking world in 2008.

The trial continues before Judge Karen O’Connor and a jury of ten men and five women on Monday.